How much house can I afford answer can vary from person to person but let me help you and give an idea so that you can understand how much house you can afford in simple language.
Well, you can apply 5 times rule to know how much house you can afford.
5 times rules say to Multiply your annual income or family’s annual income by 5 to know the approximate number which you are currently able to purchase. Have a look at the below examples to get a better understanding.
Contents
- 1 Example 1 If your annual income is 6 LPA
- 2 Example 2 If your annual income is 9 LPA
- 3 Example 3 If your annual income is 12 LPA
- 4 Example 4 If your annual income is 15 LPA
- 5 Example 5 If your annual income is 18 LPA
- 6 Example 6 If your annual income is a 20 LPA
- 7 What to do if we don’t fall into the above examples
- 8 You can’t spend more than 30 or 40 % of monthly income should not go to EMI
- 9 How to buy a dream house
Example 1 If your annual income is 6 LPA
So in this 6 lakh multiplied by 5 which is coming to 30 lakh rupees. You can look to purchase around 30 lakh rupees home according to your current salary.
Example 2 If your annual income is 9 LPA
So in this 6 lakh multiplied by 5 which is coming to 45 lakh rupees. You can look to purchase around 45 lakh rupees home according to your current salary.
Example 3 If your annual income is 12 LPA
So in this 6 lakh multiplied by 5 which is coming to 60 lakh rupees. You can look to purchase around 60 lakh rupees home according to your current salary.
Example 4 If your annual income is 15 LPA
So in this 6 lakh multiplied by 5 which is coming to 75 lakh rupees. You can look to purchase around 30 lakh rupees home according to your current salary.
Example 5 If your annual income is 18 LPA
So in this 6 lakh multiplied by 5 which is coming to 90 lakh rupees. You can look to purchase around 90 lakh rupees home according to your current salary.
Example 6 If your annual income is a 20 LPA
So in this 6 lakh multiplied by 5 which is coming to 1 crore rupees. You can look to purchase around 1 crore rupees home according to your current salary.
Listen I know most of you earn less than 6 LPA and still you think to purchase 1 or 2 crore rupees house. Great I appreciate but when it comes to reality and practicality you need to always make a decision seeing your bank balance not what others are doing. In the end, you need to pay money to get your dream house. Understand this.
What to do if we don’t fall into the above examples
Let’s say you earn more than 20 LPA no doubt you know what to do apply the rule and get your dream house. But when you earn less than 6 LPA you are not able to purchase those big houses. Reality hurts right but you can’t deny it. Or if you do purchase that home by seeing others or with your ego you are going to cry your whole life because the home loan interest will not give you space to enjoy the rest of your life.
So act smart like a mature person. Well, when it comes to maturity it doesn’t come from the age it comes from experience. I hope you got what I am trying to say. See below table to understand better.
| Sr. No | Factors | Mr. A |
| 1 | Family Annual Income | 6,00,000 LPA |
| 2 | Monthly Income | 50,000 |
| 3 | 5 Times Of Annual Income | 30,00,000 |
| 4 | Downpayment ( 20% ) | 6,00,000 |
| 5 | Home Loan ( 80% ) | 24,00,000 |
| 6 | EMI @ 7.5% For 20 Years | 19,334 Rs |
| 7 | EMI as % of Monthly Income | 38.6% |
You can’t spend more than 30 or 40 % of monthly income should not go to EMI
The answer is simple let’s say you earn 50,000 Rs every month and according to the above table, you have still 30,666 Rs for your livelihood after paying the EMI of 19,334 Rs. But if you spend 50 – 60 or 70% monthly income giving EMI what you and your family will eat if you aren’t left with money after paying the EMI? You too know that you always feel 50,000 less when you start spending so think what will happen when you spend 60-70% on EMI. I hope you got the point.
How to buy a dream house
- Know where you stand concerning your financial numbers
- Look how much is needed ( your dream house cost )
- Learn high-paying skills
- Your only job will not help you to get your dream house trust me
- Create more assets
Read:- how to save money to buy a house
I hope you are smart audience you will not make stupidity like others.